Indiana Lottery privatization on hold

Gov. Mitch Daniels said Friday he is putting off but not giving up on his hopes of privatizing the Hoosier Lottery and wants a yearlong, statewide "conversation" on how best to spend the $2 billion or more the lease could bring.

Daniels said 10 companies, mostly American firms, have submitted nonbinding bids to lease the Hoosier Lottery. Half of those, he said, "are north of a billion and a half," with two offers "well over twice as big" as the $1 billion the state had estimated it could receive.

But Daniels acknowledged that his hopes of winning Indiana General Assembly approval before the legislative session ends April 29 are over.The biggest reason: House Speaker B. Patrick Bauer, D-South Bend, has been adamantly opposed.

Bauer, the governor said, has demonstrated an "iron control" over the House.

"When he says stop, it stops," Daniels said.

The governor said he thinks Indiana needs another year to have a "very inclusive conversation" on the plan and how best to invest the proceeds.

Daniels had proposed using $1 billion upfront from the lease to invest in higher education, to bring top researchers and professors to Indiana, and to keep top students in the state. Under his plan, scholarships for top students would not have to be repaid if the students remained in Indiana for three years.

But, he said, with initial offers for the lottery double expectations, the state needs to weigh the best uses for the money.

"I have a plan for $1 billion," he said. "I don't have a plan for the second billion or third billion. That's an opportunity we should explore carefully."

Possible uses for the money include K-12 education, economic development, and the outstanding pension liabilities looming for state and local governments, he said.

When Daniels proposed leasing the Indiana Toll Road, he said speed was important in securing the best deal. But Friday, he said the state would not risk losing out on the potential $2 billion for the Hoosier Lottery by waiting.

"I see no reason for that," he said. "The basic economics will still be the same. We don't think the value would diminish" by waiting a year.Daniels said he had waited to speak publicly about the offers until after he had spoken to legislative leaders.

He met privately with Bauer on Monday in his office to discuss this and other issues as the legislature heads toward its April 29 deadline.Bauer said Daniels brought up the lottery and the fact that initial interest exceeded expectations.

Bauer said he told Daniels that everyone -- the House, the Senate and the governor -- needed "to focus on what we can do."

Pressing for controversial issues such as the lottery lease, which passed the Republican-controlled Senate but did not get a hearing in the Democrat-controlled House, would risk pushing the legislature into a special session, Bauer said.

Bauer said Daniels told him he was aiming at the next legislative session. That, Bauer said, is all the more reason for Daniels not to push the lottery lease this week.

Senate President Pro Tempore David C. Long, R-Fort Wayne, said he has urged the state's mayors -- who have been clamoring for legislative help to reduce property taxes and to fund pensions -- to get behind the lottery lease. Senate Bill 577, which passed the Senate 27-20 before floundering in the House, would have put some of the lottery proceeds into police and fire pensions.

Sen. James. W. Merritt Jr., the Indianapolis Republican who sponsored the bill, said he also hopes the prospect of getting $2 billion or more for the lottery will give the plan new life.

"I'd hope people would take a second look," Merritt said.

The lease, he said, would get Indiana government out of the gambling business and also provide money for economic development, scholarships and pensions.

Bauer, though, said a first look at this plan was enough to convince most people that it was a bad idea. Privatization of the lottery, he said, "is even more unpopular" than another proposal of Daniels' this year: two new privately built and managed toll road bypasses.

Public hearings on the proposed Indiana Commerce Connector, which would have run south and east of Indianapolis, found intense disagreement with the plan and led Daniels to withdraw the proposal. Bauer said hearings on the lottery would have shown even greater opposition.

Besides, he said, if a private company is willing to put up $2 billion for the lottery in hopes of making big profits down the road, the state should be able to make those profits as well by keeping control of the lottery.

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